Fall in fuel prices likely to rein in November inflation
Alongside a score of other economic updates, the consumer price index (CPI) report for November from Stats SA will be published on Wednesday.
Consumer inflation rose faster than expected in October at 5.9% year on year versus the Bloomberg market consensus of 5.6%. The Bloomberg market consensus expectation for November is 5.4%.
Investec chief economist Annabel Bishop said in a recent update that the R1.78/l decrease in the petrol price for November would exert some downwards pressure on the inflation outcome.
The SA Reserve Bank’s monetary policy committee (MPC) meeting in November revised its expectation for headline inflation in 2023 downward slightly to 5.8% (from 5.9%). The headline inflation forecast for 2024 was also adjusted downward to 5% (from 5.1%).
“While our baseline inflation forecast has improved, risks to the inflation outlook are still assessed to the upside,” said the committee.
A 8.7% inflation rate for food and nonalcoholic beverages contributed 1.6 percentage points to headline inflation in October.
The Bureau for Food and Agricultural Policy said in its latest food inflation brief that higher food prices were driven mainly by inflation on bread and cereals, vegetables and dairy products. Vegetables saw yearon-year inflation in October of more than 23%, followed by sugar-rich foods at 17%. Bread and cereals, which represent a staple food for many South Africans, saw inflation of almost 9% in October. The MPC said in its November update that food price inflation remains volatile and the expectation of adverse weather conditions caused by the El Niño event, which is predicted to persist through the 2023/24 summer months, “present longer-term concerns”.
The MPC expects headline inflation to stabilise at 4.5% in 2025 and 2026.
The Bureau for Economic Research (BER) will release its inflation expectation survey later in the week, which will provide further insight into possible inflation trends for the next two years.
Its previous survey, published in September, showed that average inflation expectations of analysts, business people and trade unions seemingly peaked in the second quarter of 2023. “Analysts expect the lowest inflation rate, reaching 4.8% in 2025, while businesspeople expect the highest rate at 5.7% in the same year, with trade union officials at 5.3%,” the report said.
On Monday the BER will release its latest quarterly retail survey for trade sectors. The survey provides the latest information on trends in the sector, as well as an outlook for future activity.
In its previous survey, published in September, the BER said further improvement is likely in the fourth quarter given retail confidence in quarter three improved to 32% from 20% in the previous quarter. “We could see a further improvement in quarter four if food price increases moderate and the [Bank] maintains its pause in rate hikes. However, load-shedding may continue to dampen consumer spending in the sector,” the BER said.
The Bank will publish its latest quarterly bulletin on Thursday in which it will provide an overview of economic indicators on activity for the third quarter.
Also on Thursday, Stats SA will publish the producer price index (PPI) for November. The annual percentage change in PPI for final manufactured goods was 5.8% in October. Month on month, the PPI for final manufactured goods increased 1%. The category of products that contributed the most to the headline PPI annual inflation rate includes petroleum and coal, chemicals, rubber and plastic. These increased by 5.8% year on year, and contributed 1.6 percentage point to the annual headline PPI rate.
Other releases by Stats SA include October production and sales data for the mining and manufacturing sectors on Tuesday. On Thursday, Stats SA is expected to release the residential property price index report for September and quarterly employment statistics for September, among others.